Q3 2024 Northwest Pipe Co Earnings Call
Greetings and welcome to the Northwest Pipe Company 3rd Quarter 2024 earnings call.
At this time, our participants are in a listen-only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference, please press stars. There will be telephone keypad.
at the Reminder Discount with Ben recorded. It is now my pleasure to introduce your whole Scott Montross CEO. Thank you. You may begin. Good morning and welcome to Northwest Plight Company's third quarter, 2024 earnings conference call.
and I am President in CEO of the company. I'm joined today by Aaron Wilkins, our Chief Financial Officer.
By now, all of you should have access to our earnings press release, which was issued yesterday October 30, 2024 at approximately 4 p.m. eastern time. This call is being webcast and it is available for replay.
As we begin, I'd like to remind everyone that the statements made on this call regarding our expectations for the future are forward-looking statements. An actual result could differ materially from expectations. Please refer to our most recent Form 10K for the year ended December 31, 2023, and in our other SEC filings for a discussion of such risk factors that could cause actual results of differ materially from our expectations. We undertake no obligation to update any forward-looking statements.
Speaker Change: Thank you all for joining us today. I'll begin with a review of our third quarter performance and outlook for 2024. Aaron Wilkins and our financials and greater detail. Once again, we delivered strong third quarter results, achieving new quarterly records in several key financial metrics. Our performance was driven by growth on the residential side of our pre-cast business as well as ongoing strength in our steel pressure pipe business.
Speaker Change: Our consolidated net sales increase 9.7% year over year to 130.2 million. L-pacing our strong second quarter and reflecting the highest quarterly revenue ever reported by the company.
and the 27 million dollars of gross profit generated in the third quarter was also a quarterly record. In addition, our focus on effective working capital management help drive another quarter of strong cash flow generation.
Further breakdown our segment level results. Revenue from our steel pressure pipe segment remained at near record levels, totaling 85.9 million, and increasing 6.7% year over year in line with our expectations. Our performance primarily reflected continued high production levels through the ongoing strength in the bidding environment that has carried over into the second half of 2024, as well as changes in project timing.
Speaker Change: Our SPP backlog, including confirmed orders, was 282 million as of September 30. Down from 348 million as of June 30, 2024, and down from 335 million as of September 30, 2023.
Although our backlog decline, our SPP team has done a tremendous job executing on Bids and Projects. We attribute the third quarter decline of backlog primarily to the timing of expected job awards, our Mixed Back Log into a lesser extent lower steel prices.
Speaker Change: Nevertheless, we believe our backlog remains healthy in the bidding environment remains strong with a significant number of tons expected to bid in the fourth quarter. As a result, we expect our backlog to improve through year end.
Our third quarter performance was partially offset by lower real-life selling prices due primarily to lower raw material costs.
Speaker Change: While steel prices were fairly volatile throughout the course of the third quarter, they appear to be stabilizing in the $700 per ton range, with lead times standing at about four to five weeks.
Now turning to our precast segment, precast revenue increased 15.8% year over a year to a new quarterly record of 44.3 million, driven by strong operational execution by our teams in the field, and a backdrop of continued robust demand on the residential side of our Geneva business, which resulted in strong production and shipment levels.
However, reduced shipments on the non-residential construction related portion of our precast business at park, offset some of this strength. Mainly due to the continued impact of current interest rate environment on the commercial construction portion of the business.
We expect this to reverse and become a tailwind as rates continue to come down.
Speaker Change: To a lesson we stand our production was also impacted by the severe weather events we experienced in Texas in July.
Currently, in the non-residential construction market for projects that are going in the planning, which is generally about 12 months prior to breaking ground, the commercial and institutional segments are up 31% and 4% respectively versus last year's levels.
As interest rates fall, the length of time between planning and breaking ground is expected to compress. As a result we are expecting upcoming near-term strength in the non-residential market.
Speaker Change: On the pricing side, the residential part of our precast businesses enacted multiple price increases throughout 2024 driven by strong demand that we've experienced at the Geneva locations.
Speaker Change: However, our non-residential pre-cast business experience some downward pricing pressure as a result of the elevated interest rate environment and the negative impact it has had on the commercial construction demand.
With the initial Fed 50 basis point rate cut in September, and the additional cuts that are expected before a year end, we expect a non-residential construction market to strengthen in the near term.
As of September 30th, our precast order book total 57 million, down modestly from 62 million as of June 30th, 2024, further reflecting the resilience of this segment as we enter the traditionally slower time of the year. And it was up from 52 million as of September 30th, 2023.
Our consolidated gross profit for the third quarter increase, 40% year over year to 27 million. A new quarterly gross profit record for the company.
which resulted in a strong gross margin of 20.8% up from 16.3% in the third quarter of 2023. This is the strongest quarterly gross margin we've reported for the current SPP in pre-cast configuration of the company.
Our SPP gross margin of 19.4% was strong, increasing by approximately 580 basis points over the prior year period and 40 basis points over the prior quarter. Primarily due to high production volume, with strong overhead absorption, as well as changes in product mix. In addition to the ongoing strength and the bidding activity we've been experiencing.
Speaker Change: Our pre-cats approach margin of 23.5% improved by approximately 160 basis points over the prior year period and 140 basis points over the prior quarter. Primarily resulting from the strength and the residential construction market, as well as changes in product mix. Markins on the residential construction site at Geneva location, strength and the verses of the year ago quarter.
As indicated, non-residential commercial construction market demand has been adversely affected by the high interest rate environment creating some margin compression.
In addition, early third quarter severe weather related impacts on our production in shipping days not only reduced early third quarter revenue with the park facilities, but also over reduced production levels leading to lower overhead absorption further impacting non-residential margins.
Next I would like to provide an update on our precast, product, spread strategy to promote organic growth in the business.
Year to date, we have bid on over $47 million worth of projects outside of the state of Texas, and booked approximately $8 million worth of orders. As a result of our ongoing efforts to enhance capacity utilization of our Texas-based pre-cast plants to maximize overall efficiency and production volume, further we gain additional traction on products credit that Geneva plants and Utah by booking approximately $1.7 million of park-related projects. Our goal is to book an excess of $2 million worth of park-related projects at Geneva in 2024.
has previously noted once the pork precast products.
established at the Utah locations. We plan to expand our product spread strategy to additional current Northwest pipe geographic locations. This is in the planning stage and is scheduled to occur over the next couple of years. Further to expanding our capacity, we are pleased to report that our investment in the new reinforced concrete pipe and manhole mill at our Salt Lake City. Utah facility is near completion. This will unlock additional production capacity and capabilities, positioning that you need a business for additional growth. In addition to our organic growth activities, we are continuing to actively evaluate M&A opportunities in the pre-cast related space that would help accelerate progress in our pre-cast strategy by increasing.
Speaker Change: [inaudible]
Properly executed our growth strategy, repaying debt, we've occurred to finance the 2021 acquisition of Park USA remained a top strategic focus of our capital allocation philosophy. And in the absence of a creative M&A opportunities, we may opt to reproduce shares of our common stock.
Speaker Change: Well, we did not repurchase any shares during the third quarter. We remain opportunistic in our approach. Since the initial authorization of our share repurchase in November of 2023, we've bought back a total of 174,000 shares for $5.1 million as of September 30th.
Before I conclude, I'd like to summarize our outlook for the fourth quarter of 2024.
In our SPP business, we anticipate a stronger fourth quarter than we've seen in recent years, despite it generally being the slowest quarter of the year due to two major holidays, as well as as expected weather-related events. Nevertheless, we expect revenue in gross margins to be relatively strong for fourth quarter of a year. Primarily related to mixed projects that we've booked in their overall impact on production volume. We also expect backlog to remain strong by historical standards given the volume of expected steel pressure pipe bidding for the remainder of 2024.
Speaker Change: Further, we remain encouraged by the amount of activity we're seeing on our current upcoming Water Transmission Projects.
which can be found detailed in our investor presentation on the investor relations portion of our website. We continue to expect a healthy bidding year in 2025 similar to 2024 levels.
Speaker Change: In the precast business, we are expecting our fourth quarter revenue to be balanced sequentially from the record third quarter we just reported with relatively stable gross margins.
We continue to believe in the strength of the precast business and the mid-to-long term, given the significant level of pent-up demand specifically for residential housing and a growing need for infrastructure spending in the U.S. and our growing market position.
In summary, I'm very pleased with the strong operational and financial performance we delivered in the third quarter. Thank you to all of our team members for your continued dedication to success and safety in the field as we execute our growth strategy and pursuit of enhanced shareholder and stakeholder value. Our performance continues to be bolstered by strong bidding environment in 2024 that is anticipated to remain elevated throughout the balance of the year and into 2025. Looking ahead, our priorities remain on one, maintaining a safe workplace where our employees are proud to work to persistently focusing on margin over volume. Three, continuing to implement cost reductions in efficiencies.
Speaker Change: at all levels of the company for intensifying our focus on strategic acquisition opportunities to grow the company and five in the absence of M&A opportunities returning value to our shareholders through opportunistic share repurchases.
Speaker Change: I will now turn the call over to Aaron who will walk you through our financials in greater detail.
Thank you Scott and good morning everyone. Begin with a third quarter profitability and saw that in it income was $10.3 million or $1.2 for the alluded share compared to 5.8 million or 58 cents for the alluded share in the third quarter 2023.
Consolated Net Sales increased 9.7% to 13.2 million compared to 118.7 million in the year-go quarter.
DO Pressure Pipes segment sales increase 6.7% to 85.9 million, Here to 80.5 million in the third quarter of 2023.
The improvement was driven by an 18% increase in tons produced, resulting primarily from improved market demand in a continued strong, but even environment, as well as changes in project timing. It was partially offset by a 9% decrease in selling price per ton due to lower raw material cost.
PECAS segment sales increased 15.8% to a new quarterly record of 44.3 million compared to 38.2 million in the third quarter 2023.
This was driven by a 35% increase in volume shift, which was partially offset by 14% decrease in selling prices resulting from changes in product max.
Our Geneva Business Continued Strong Performance on Reswing at the Man in Utah, while the headwinds for commercial construction demand in Texas continued, and, in covering our art business that was also spoken by weather-related delays.
As a reminder, the products we manufacture are unique and therefore shipment volumes in the case of precast.
Production volumes in the case is steel pressure pipe.
and the corresponding average sales prices for both segments do not always provide comparable metrics between periods as they are highly dependent on the composition of each segment's product mix.
Speaker Change: In solidated growth profit was also a record increasing 40% to 27 million or 20.8% of sales compared to 19.3 million or 16.3% of sales in the third quarter of 2023.
SCP-T-Rose Prophet increased 52.4% to 16.6 million for 19.4% of segments sales.
Heard to gross profit of 10.9 million or 13.6% of segments sales in the third or 2023. Primarily due to higher production volume resulting from improved market conditions.
Speaker Change: 3 Cascrose profit increased 24% to 10.4 million or 23.5% of pre-cascales from 8.4 million or 21.9% of segments sales in the third quarter of 2023, primarily due to increased 7.4 million.
Delling general administrative expenses increase 13.1% to 11.6 million or 8.9% of sales are to 10.2 million in the third quarter of 2023 or 8.7% of sales.
Delling General and Administrative expenses increase 13.1% or 11.6 million or 8.9% of sales compared to 10.2 million in the third quarter of 2023 or 8.7% of sales.
Speaker Change: The increase was primarily due to higher-insidium compensation expense.
Our non-cash and cinema compensation expense in the third quarter of 2024, was 1.2 million and purchased 0.7 million in the year ago quarter.
For the full year 2024, we now expect our consolidated, selling, general and administrative expenses to be in the range of approximately 47-48 million.
Speaker Change: The appreciation and ambrization expense in the third quarter of 2024 was 5.2 million compared to 4 million in the year ago quarter.
We expect appreciation and ammerdate, ammerdate and expense to be approximately 19 million in the full year 2024.
Speaker Change: Enteres expense increased to 1.5 million from 1.2 million in the third quarter of 2023 due primarily to higher interest rates and an increase in our average daily borrowings.
The full year 2024, we expect interest expense to be a product of 26 million.
Speaker Change: Our third quarter income tax expense was 3.7 million, resulting in an effective income tax rate of 26.3%. Improved to 2 million in the prior year quarter or an effective income tax rate of 25.7%.
Speaker Change: Our tax rates for the third quarter is a 2024 and 2023, from packed by non-deductible permanent differences.
We now expect our tax rate for the full year of 2024 to be within the range of 20 to 21%.
The change in our expectations due to the statute of limitations that have expired on uncertain tax positions during the fourth quarter.
Now I will transition to our financial condition.
Speaker Change: NetCash provided by Opera and Activities, 22.7 million in the third quarter of 2024, for the 16.9 million in the third quarter of 2023 due to the company's improved profitability.
and proving cash flows remain the key strategic focus of our business and critical for the execution of both our growth and stockholder return priorities.
Well, our third quarter free cash flow is improved. The working capital needs of our steel pressure pipe business can be highly variable between quarters and therefore weak concentrate on the annual performance of this key metric.
We continue to anticipate free casflers to range between 19 and 25 million for the full year 2024.
Our capital expenditures totaled 6,000 in the third quarter of 2024, compared to 4.8 million in the prior year quarter.
Speaker Change: As a reminder, we anticipate completion of the new concrete pipe mill project in Salt Lake City by year end.
which asks after successful commissioning to expect it to improve production yields and efficiencies on reinforced concrete pipe and manholes we produce and sell out of that facility.
Speaker Change: Pissipate our total cat backs to be in the range of 20 to 22 million for full year 2024, which includes approximately 8 million of investment in our new reinforced concrete pipe mill, and associated building, and the remainder primarily for standard capital replacement.
As of September 30, 2024, we had 60.7 million of outstanding borrowings on our credit facility. We've been approximately 63 million in additional borrowing capacity on our credit line.
In summary, we are pleased to deliver another very strong quarter of an inch performance.
and the consecutive quarterly records for consolidating gross profit. Our steel pressure pipe business is well positioned for the remainder of the year and into 2025 and our pre-cats business returned a new quarterly revenue record for that segment.
These achievements are made possible by employee's exceptional execution.
I would like to thank each of them for their commitment to say, the well-dark shareholders for their continued support and trust in our FUSPIC company.
Speaker Change: I will now turn it over to the operator to begin the question and answer session.
Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in a question, cue.
You may press star too if you would like to remove your question from the queue. For participants, use a speaker equipment and maybe necessary to pick up your handset before pressing the star key. One moment while we pull far first question in.
Speaker Change: Our first question comes from Brett Bilman with VA Davidson, please proceed.
Hey, good morning.
Speaker Change: Good morning, my friend
Brett Bilman: just went on the backlog for the quarter down 16% year on year. I'm like sure that decline is just comparisons of lower steel prices versus
is what you've burned in the quarter in terms of volume.
Speaker Change: I think it's a little bit of the climb, but right now it's waiting for some of these jobs awards that we've been notified that we're going to get or a little bit slower coming in. That's a piece of it and it's just how things are bidding and as we're looking at this, we expect the backlog actually to start going up through you at year end and ultimately, the way things were bidding earlier, we thought it was going to go down. So I think that the backlog is strong, you know what I would say about the pricing level, you know, the steel costs are probably down for us about 22%, versus where they were a year over a year, but the price is only down.
and the first time I've been in the world for a long time. It's just a matter of job timing being awarded. We've been feeling comfortable with the backlog. We're going to carry out at the end of this year. And what we're going into with a bidding environment next year looks to be pretty similar. And what I would say about the current bidding environments or the bidding levels, I mean, these are these are okay years with the amount of...
and the steel pressure pipe markets. But they're not huge years, and ultimately, with the IIA funding that's out there, we think that those numbers are going to really jump up as we get out to 26, 27 and 28 based on the amount of projects that are coming through. So I think we've got a pretty long runway with strong backlog in front of us. And the steel price is going to jump up and down. But I think the most important thing right now, Brennan is the margin on the pressure pipe side is responding positively, getting up to 19.4% even in an environment when it's just a okay bidding level in the environment. And a lot of that's due to the consolidation that's happened in the business. So we're pretty comfortable with what's going on. Steel price is going to fluctuate. And you know.
Speaker Change: It seems like there's this invisible barrier that's at around $700 a ton where it really doesn't get much lower than that. Where 25 years ago in the steel business, you saw things drop off the cliff like a rock. You don't see that anymore. So it seems to get down to around $700 a ton and then start to bounce back up because we've seen steel pricing increase announcements coming out which will ultimately affect what the MonoBac Log is too. Now that's a long-winded answer.
Speaker Change: and probably relatively simple questions that you ask, but I thought I had to get a bunch of that stuff in there for you.
Speaker Change: I appreciate it Scott. Maybe just to follow up on the...
Guy that means it's everything held constant with steel prices and I know they won't
How much of a year?
I've a revenue headwindie you have going into next year and SPP just from a pricing perspective and I don't think that means any impact to your gross profit since essentially it passed through but trying to get a sense of what kind of headwind you'd still have an addiction just from a pricing person.
Speaker Change: [inaudible]
I think that if it stays constant to where it is right now, we're going through our annual planning process right now creating annual plan. I don't see much of a change from, you know, this is a huge year. I mean, this is...
is a really big year for fuel pressure pipe the way it's coming in and you can do the numbers and you're in a lot of things going to be. I think we're kind of looking at numbers that are right in the 300 million plus range and that's without anything changes changing in the steel pricing. And if the steel price goes back up obviously that'll carry more revenue and create not a better gross margin but it'll create more gross profit dollars.
Speaker Change: So I don't think we have a huge headwind with that right now because we just don't see this steel price fall down to 345 or 350 bucks a ton now. It stops at like 700 and the pricing is relatively stable because the the the business has been consolidated down to really three major suppliers in the steel pressure placement.
and the American Spiral World. So you have the capacity and the hands of fewer people. And ultimately, it's a more stable bidding environment because of it.
All right, good. Just last one. I mean, it's the meaningful turnaround in revenue and precast this quarter I guess.
Taking all your commentary, it seems as though even there's some sustainability in this trend going forward, just getting them what you're seeing out there in the markets, products, products, etc.
Yeah, I would, we're in a situation right now, Brent Ware.
We're still not hitting on all cylinders because the residential side of the business is awful a little bit right now. It did interest rates, right? There was a little bit of a weather impact to the beginning of the third quarter, but the residential business has been off a little bit and that's, excuse me, the non-residential business has been off a little bit, and that's mainly at the park facilities. But what we're seeing now, and I'll say this before we're seeing going forward, we're seeing significant strength on the residential side of the business at the Geneva facilities. I mean, we're looking at numbers where there are almost twice as big in revenue as when we purchased them back in 2020, and the residential side is really, really strong.
But going forward, I think, you know, we continue to see that kind of strength because if you look at a lot of the indexes out there, you know, the total construction starts only up about 2% right now. Residents will up about 6% and right now, non-residential is pretty flat again because the interest rate impact. Well, if a 50 basis point dropped that the Fed did in September, in the expectation of 25, 25 basis point drops at the next two meetings are starting to create a little bit more momentum and the dodgeable minimum index. And right now, versus September last year, the momentum index is about 21% higher than it was in September of 23. And most of that is on the commercial side.
and a little bit higher on the institutional side with the institutional side is held in quite well. But the commercial side with these data center construction and hotels are starting to pick up. All those things and all that indicates a pretty strong non-residential market coming at us. So if we continue to have this strength that we're seeing in residential at the Geneva facilities and starting on all cylinders in the non-residential market comes back strength wise. We expect that to continue to grow as we go into next year and beyond. So we see a lot of strength in that business right now.
So I think there's some sustainability there and there's some growth plans there that you're going to continue to see that grow. You know, even before you're considering any M&A activity that we may be working on at this point. So I think there's good sustainability there.
Alright, very good. I'll pass you now the thanks guys.
You'll probably...
The next question comes from Julio Romero, the Ciddodian Company, please proceed.
Speaker Change: i
Hey, good morning Scott, Aaron
Hi Wilkins, what are you guys at tribute to the resilience of the residential portion for Cas2?
I think it's the same thing that's been going on. It's not migration into the state, Utah, and in and around Utah. Housing markets is very, very strong. We've seen it. We were worried as we've talked before a couple of years ago about it falling off with the increase in the interest rates, but we just have not seen it. In fact, it's continued to get stronger and stronger. There's some kind of a demand in the housing market because when the interest rates were high, there isn't enough inventory on the market. So houses are still being built. And Utah and around Utah, Idaho is a pretty good place for people to move to and live. And that's really what we...
and the Trimba Distranck 2. Plus I think it's...
Speaker Change: We've got a really good management team at the Geneva facilities and they've been very good at executing growth in the market and focusing on getting the price up and things like that and it's just a strong market and we're making sure that we're doing the right things in the market to continue to grow the business.
Speaker Change: i
Speaker Change: got it. That's helpful. And you mentioned you expect the non-residential portion of precast to strengthen in the near term due to interest rates falling.
Speaker Change: Just trying to...
You know, if you could help us put a finer point on the timing of that straightening, you know, is that like a first half 25 event, a second half 25 event or maybe even 26 and then secondly, how much of that near term.
strengthening of non-res should be from interest rates falling versus maybe an increase in public spending flowing through.
Speaker Change: Okay, so the first part was what piece again, who was the first part?
Just try to get the question of a firepoint of the timing of when.
Speaker Change: and Ron Ryskets' better.
Speaker Change: Yeah, yep, there's a video for Scott. We thought it was end over.
Speaker Change: Yes, normally, normally, when you're looking at these things in this momentum index, it's usually projects that are going into planning about 12 months before the project actually breaks ground or starts. But with the interest rates coming down, the time the these things are coming to fruition starts to get a bit compressed, because people have been waiting to do stuff for the interest rates to come down. So you're probably seeing we're starting to see the beginning of right now where some of the yards of production of concrete at our park facilities are going up, quarter over quarter versus last year. So it's starting to move up. So what you're probably seeing is a mid 25 or a little bit past that mid 25.
Speaker Change: and I think it's going to be a strength and slowly. And then what we're going to see is it really strengthen when we get out to mid to later 2025. And you know at that point we expect to have both the residential and non-residential hitting on on all cylinders. What was the next part of that?
Question? Yeah, that's, well, you answered the question I had even after that, which was, you know, the residential should stay resilient as
as the non-rises gets better and then you are kind of hitting on all cylinders. Going out, the second part of my question was really just, you know, how much of that near-term strengthening of non-rises should be from interest rates falling, but also from, you know, an increase in public spending, IIGA funds flowing through, etc.
Speaker Change: Yes, so for the, you know, really when we're talking about the non-reson res we're talking about the pre-cast piece, right? So the interest rates are really, really going to drive that and it's really going to be more commercial the non-building residential side is really more of the IJH stuff or taking into account what that's going to do with the steel pressure-plight business. So we haven't even really seen any of that yet. That's I think all in front of us based on what we can see. So it's the interest rates are just kind of lighting the fire and the more they come down, the fire is going to rise, you know, and the business gets stronger and stronger and for us on the residential side is...
is we talked about in the script. You know we have the exact 2500 facility getting ready to start up and what that does is going to increase our capacity and increase our efficiency in the residential market in and around Utah and that's just going to lead to higher production capacity and higher revenues and margins and residential. So we see growth going into 25 on the pre-cash side and the...
The increase in the non-residential market can really, really, I guess, push it up as we go late in the 2025. So the prospects really look strong.
Great context there, and then maybe just last one for me would be on.
Speaker Change: talking about the free cash flow a little bit. You had another strong quarter here, even as fuel pressure pipe continues to do well.
and Aaron I think you mentioned the working capital, the laser, the SPP can be.
Speaker Change: and a quarter of the quarter basis.
We saw the day sales, take up a little bit sequentially, does that day sales fit your kind of continue to trend upward as the O'Presher pipe continues to do well?
Speaker Change: Yeah, you know, it does tend to go that direction, especially in the two larger quarters of the year, which is typically second-let-thirty.
Yeah, it's not a typical for the fourth quarter, stays kind of fall off a little bit and it's a little bit more working capital efficiency come through in your fourth quarter, free capital.
He left it out by a little bit of a drip there. Now our business levels aren't something right now that we're expecting to see as much of a fourth quarter fall off as we've seen in other years.
Speaker Change: We're expecting them to stay relatively elevated so I'm not I think we'll get a little bit of it Julio and in the next fourth quarter more more working capital bounce.
and our free cash and we got in the second quarter compared to the third quarter compared to the third quarter of a year ago. But I think the biggest things really kind of propelling our cash for this year is really our profitability.
and another piece of that, Julio, is the thing that we've worked on with cash flow is making sure that we're mining the cash out of this steel pressure pipe business. And that, a big piece of that is getting paid for progress payments for steel pressure pipe, getting paid up front for steel. And anything we can get paid up front with. And that's really contributing to the cash flow too, going forward along with the efficiency of how we're managing the cash now. So I think that's such a focus because that's part of the goals this year, and very, the variable compensation. It's really to drive a cash flow level for the company, which obviously we know.
Speaker Change: Means a lot and it means not maybe not quite as much as the profitability of the business, but it means a lot, cash is king, right? So the idea to get cash in is really, really being driven into the business now and the way we approach the business and I think the teams responding well to getting that cash in and really bumping up the cash flow, that's going to continue to be a focus for us.
Really helpful. Thanks again for taking the questions.
Speaker Change: Sure, Leo.
The next question comes from Ted Jackson with Northland Security's Police Proceed.
Thanks for congratulations on another excellent quarter.
Speaker Change: Hey Jen.
Ted Jackson: First of all, I'm going to tell you that I have a couple of friends that have decamp from California and moved to Utah, so they're helping you out.
The more it can be, the better we're going to be. So I'll trust you, man, like their house. It was took a lot of concrete to build their big.
on the SPP and the backlog. You've put up a couple of orders of really, really.
Excellent margin and if you look at it, you know, you're up at life, you know.
Hi, you know, at the higher end of kind of the historicals for, you know, the margin you're generating out of that business.
and I know some of that surpass the utilization rates and such, but when we look or when you look into the backlog that you have.
What's the margin profile for that? I mean, we able to maintain that call it 19th-percent margin in SPP in fourth quarter and the how would we think about that for 2025?
I think the thing about the fourth quarter is weather events, right? What are we going to have weather events, icing storms, things like that? You know, you got two major holidays in the fourth quarter, so generally it's a little bit lower, so I don't know that the fourth quarter is going to be as indicative as we're going to see going for. We think the margin is going to be strong, like it's been going through this year, but we don't think that it's going to be like we're going to see it in 2025, right? Because we're expecting production levels in business levels to be similar to 2024, there's been a lot of stuff betting a lot of stuff in the fourth quarter, so the margins in backlog are very strong. But the...
A really big thing is the overhead absorption, right? The amount of production that we've been getting has been relatively strong. Right now I would tell you, we're at about 65% capacity utilization at our steel pressure pipe facilities and that is a pretty strong capacity utilization. So if we stay up at those levels, I think you see margin stay up like that and maybe even get a little bit higher. When you start putting multiple strong years together with demand, that's when you start seeing margins in a steel pressure pipe business that start beginning with a two and it being sustainable. And 2025 looks like it's going to be a decent bidding year two, but not like I think what we're going to see in 2627 and 28 with the I.J. A.
I think those are the years where you can see margins be very strong and what I'll tell you is we don't announce our results on a monthly basis but we have seen months recently that have been over 20% margins in steel pressure pipe so that's a good sign for going forward especially with the bidding that we expect to see.
Ted Jackson: So if I were to take what you just told me and consolidate it down.
If you take out the utilization, which I completely understand that the next couple of quarters, it seems like there's always something that happens in the under control. But that the business you have in pipeline and the outlook that you see for the next few years
Results in all of us being able a better margin of the environment and it will push you, you know, if it.
comes to pass the way it looks like it might push you into its college sort of on an average basis, you know, historical records.
Speaker Change: You're starting to push regular margins, or the 20% I mean that's that's the top of the top for you guys
Right, I think we've seen margins in the past and quarterly margins there and you have to correct me if I'm wrong, but I think we've seen a size 25%.
Ted Jackson: in a quarter.
and we had a lot of work going on. But what you're saying is right, Ted, I think when you start getting over 20% 21, 22, that's probably about the top of it that we've seen. But we have to see an environment like this with IJ, A-FUN to jobs coming at us, and who knows. I mean, you could see those margins getting to the mid 20s again. If all that hits like we think.
Speaker Change: Look at this.
Okay, I'm switching over to Capback. So you know, you had a big, big piece of Capback during...
Speaker Change: in 2024 with the Geneva plant and you know they $8 million that you put into the
and the Park Lake, the Salt Lake City expansion. When I think about 2025, CapX, would you, is there other projects like that? They're going to come in to keep CapX from...
Falling off, or would we see cat-effects drop down from, you know, what are you probably going to do? It's called 20 million.
and I was like, what, what, when I think about CapEx, you know, if you have, I do mean that's a really big project, you know, you've had big projects in the past, but
You know, when we see it come back down to like a 21 level where you're, you know, 13, 14 million bucks is there's something else on deck that's going to keep it up around 20.
Speaker Change: No, I don't think it comes down to like a 12 or 13, but you know, I think when we've looked at this going forward with the things that we're doing I think in the area of 16 17 18 is probably reasonable unless we have a big project like we did with the exact 2500 to Salt Lake City That project was was a you know over a number of years was an excess of 20 million dollars So spent on that project, so so ultimately if you look at in the level in the area of depreciation Minus a big project like that, it's probably right and it's probably right in the 16 17 18 million dollar range
Ted Jackson: Ok.
and then just circling over to the M&A. I know you guys have been looking hard, knocking around, trying to find stuff. I mean, you described your ideal.
Acquisition and I hope you find because it's sounded perfect. Is there something like that? Is there something like that that you're actually in process of discussion?
You know, we're getting to the point where I would say that most of the things that you wanted to get done with regards to bringing Geneva and Park in to Northwest Pipe and kind of...
Ted Jackson: Cross-Pollinating, if you would, for those businesses, they're well-allong, and I know it's not that you haven't.
and I'm just saying, doing any acquisitions, but ideally your thought to me it always been, you know, that it would be best that once you get this integration work done, that really have something kind of come in. And I think you're kind of at that point now. I mean, where, what's the timeline to please see something in 2025? I mean, is it that active or, you know, you're just all knocking around trying to find it?
I think we would like to have something by 2025.
Speaker Change: We're always working on things, we're always in discussions with people on M&A. And it's an area of focus. And ultimately we would like to have something done by 2020.
Speaker Change: You're putting me a finger.
So I did my final question and I'll let you go, Scott, is just talking about back longer bit. You always put forth the back log number on a dollar space which is fine but you know given the vault and you touched on this a bit with.
with in the context of today's call. But the volatility within steel prices could you offer?
Some, you know, like color, I know you don't want to get into too much detail about kind of what's the volume of backlog that you have.
Related to say 12 months ago in last quarter and kind of how you see it rebounding because you are clearly expecting a tree bound in the fourth quarter in the fourth quarter. But you know, like this kind of something to kind of sort of apples to apples at force.
Speaker Change: and the way.
Speaker Change: Now the way to look at it is the volume right now is a little bit lower than it was. So part of the thing that makes up a backlog is when we have a lot of tunnel work and backlog, we refer to that as long, long fuse work because it's tons and or in backlogs that can be in there for, for sometimes two years before it actually turns into orders. But we don't, we don't have much of that tunnel in backlog right now. The, what we have in backlog is actionable and it's down a little bit from the, the place, the areas that you, you just asked about, but we are also waiting for tons to come in and hit the backlog, which should start pushing us back up toward where we're.
Speaker Change: We've been tonnaged wise as we get through the end of this year and early next year.
Speaker Change: So we're not really falling off that much. And like I said, steel prices are down year over year for us and you look at consume steel prices about 22%.
Our price is only off 9% year over year. So the prices are staying up pretty high and so it's not quite apples apples but the tons are going to be pretty similar as we get through the end of this year or 10 to those other periods that you asked about.
Okay, okay, that's a fair answer. Again congrats on the quarter it was impressive.
and I'm going to talk to you.
The next question comes on day right with Henry Investment Trust. Please proceed.
Yeah good morning
Good morning and good.
and well I'll offer my congratulations to William Med. You got your point, you said margins.
Speaker Change: So, um...
Speaker Change: You know, you've been added a long time and it's got to feel good to have all the cylinders finally. And thanks for that extensive discussion about.
Ted Jackson: SPP margins that Ted asked you about and that was super informative. I wanted to ask about, you said that in precast the better.
It sounded like Utah was really good, you know
How would that contrast with how Texas was?
Well, Texas has been lighter volumes to excuse me, David, so that's been down a little bit. So the margins are...
God, probably on the residential side, or at this point probably a few to several hundred basis points higher than the non-residential side because of the amount of absorption that's going on in the higher level of business. And we're not quite hitting on all cylinders at this point because like I said, the non-res is relatively light and those are the part facilities. And it's just starting to come back. So ultimately when that comes back, we expect the margins at part to be as good if not better than they are at the Geneva facilities because obviously it's more of a specialty product. So it is down though right now and the Geneva facilities are about, I'd say, a few to
and several hundred basis points higher at this point.
Okay, and and when you mentioned in the press release, you talk about increase in volume, decrease in selling price due to changes in product, next and precast.
What products are you are you selling a lot of?
Well, as you leave a product, there's a big part of the product, the bigger part of the pre-cast mix right now. So, those are more infrastructure products that are generally carrying lower selling prices than what you see of the product. So that's a big part of the product mix. The other thing that we're seeing a lot of is corporate work, especially at the Geneva facilities. And that corporate work is not a huge price item, but it's a lot of concrete and it carries a really good margin. And so that's a little bit of what's affecting it, too.
Speaker Change: But overall, it's really the higher mix of Geneva shipping and precast versus, you know, what we saw, you know, maybe a couple years ago and that's what I would attribute it to.
Okay, well that's all I have and again congratulations and thank you.
Great to talk to you David.
Thank you. At this time, there are no further questions and Q I like to turn the call back to Scott Montross for closing comments.
Scott Montross: Yeah, just a few takeaways before we leave. Obviously, we expect to finish with a strong fourth quarter, really.
and levels that are strong, four or fourth quarter of the year. And as we've talked about in this call, we expect 2025 to be a very similar to what we saw on 24 on the CO pressure pipe side, and we expect to continue to gain strength on the precast side. So we're positioned pretty strongly for the near term and midterm on both SPP and on the precast side. And ultimately we're going to get some tailwinds from the IAJ funded stuff for the work that's going to be funded by the infrastructure package. And it probably really kicked us into high years. We get through 25 and it took into 2000 and 26. And again, we expect...
and the precast business strength and over that period of time. We've talked about the products spread. The product spread is going fairly well and the business, the product business at the Geneva Facilities is continuing to grow and ultimately we're going to spread that product, other Northwest Plague locations and spread that product across the country. So, and if you look at, and I've said this before, if you look at where we are in the just in the third quarter of of of 2024, we were at a hundred, a hundred, a hundred, hundred, a hundred, a hundred and a hundred million in revenue and twenty seven million of gross profit in just a third quarter compared.
2,017, the full year of 2017 was 132 or 133 million a revenue and I think it was something about like $5 billion in gross profits. So obviously the company's grown significantly over that period of time and that's a path that we're going to remain on not only through.
Speaker Change: or organic growth.
Speaker Change: with products spread to taking products to different locations, but also on the M&A side. So ultimately we have a lot of runway in front of us and we're going to continue to grow the company. And I just want to thank everybody on the call and all the employees for their support and dedication to this business. And we look forward to speaking to you again in March when we talk about full year results. So thank you very much.
Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
Speaker Change: [inaudible]
The End.